Calif. Prebankruptcy Law Gets Test Run In Stockton Ch. 9 Case

Law360, San Diego (June 28, 2012, 10:43 PM EDT) -- Stockton, Calif.'s bankruptcy filing Thursday after closed-door negotiations with creditors failed will serve as an important test case for whether a new state law requiring prebankruptcy mediation will help shorten time spent in court and reduce disputes, attorneys say.

Facing a $26 million budget deficit, Stockton sought Chapter 9 court protection in a California bankruptcy court, making it the largest city ever to file for bankruptcy. It listed assets of more than $1 billion and liabilities of more than $500 million.